Now, aside from Bitcoin and other digital currencies spawning from video games and consumer-oriented companies, it’s important to be aware that there are other types of digital currencies or so-called “cryptocurrencies.” These operate more similarly to Bitcoin in how they generally lack a centralized system that assigns value (compared to other digital currencies like virtual item trading where the items are managed by a company) and has a similar mining protocol allowing individuals to mine the currency. Indeed, even Bitcoin had a “split” changing from one cryptocurrency to two. Why are there even alternatives? What features does one cryptocurrency have on the other? How should one evaluate the choice to enter a cryptocurrency market?
In order to make Bitcoin more accessible, the system administrators for Bitcoin and other individuals prominent in the community underwent a “split” of the currency, as well as other changes to increase the speed of transaction verification. Due to the limits put in place to make Bitcoins scarce and limit the supply, the effective limit had placed a curb on growth. In response, some users chose to take a split after starting in August of this year to create a new cryptocurrency working mainly on the same system as Bitcoin, but with the ability to convert it to “bitcoin cash” and a faster mining and verification process. This would mean that Bitcoin cash would have a lower face value than Bitcoins, as they would be more plentiful. However, this would also make it potentially less secure as the blocks would grow in maximum size, and it would have a shorter history compared to Bitcoin.
Now, other cryptocurrencies outside of Bitcoin Cash exist. In the list, there is Ethereum, Ripple, Litecoin, Dash, Peercoin, Primecoin, and Dogecoin. While many of the currencies share similarities with Bitcoin such as working off a blockchain and a decentralized system (e.g., Dogecoin, Litecoin, Peercoin, Primecoin) to fight inflation. Others, like Ripple, may be managed by one group exclusively, making it work more like a credit card rather than an actual virtual currency. However, much of the differences often come from the time it takes to verify the purchase. For example, Bitcoin may take an hour to verify, compared to Ripple, which may verify the transaction faster. Others still, like Dogecoin, may distribute small amounts of the currency without a need to mine or verify, in order to better grow the currency and its adoption rate.
Ultimately, the focus of the cryptocurrencies is the adoption rate, namely what businesses or individuals will accept it as something that yields value. This is much like any other currency, such as a fiat currency, where the “money” only has value because two, but generally more, individuals agree that the currency is worth a set amount for the purposes of trade.
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